Wealth Formula Podcast

In this bonus episode of Wealth Formula Podcast, Jorge Newberry shares with us some background on what's been happening with AHP as well as his perspective on real estate and the debt market.

You know what drives me crazy? Politicians talking about how rich Americans need to start paying their "fair share". First of all, they aren't really taking about the rich. They are talking about you—the high paid professional. To be clear, if you are making $400K-$800K per year as a W2 wager earner, you're doing well for sure. But you aren't rich. Yet, you are the one that gets vilified and gets destroyed by the tax code the most. And let me ask you a question. Do you think you are paying your fair share of taxes? In California, you'd be paying a tax rate of over 50 percent. I bet you don't think that's fair either. At least you can agree with those politicians on something! Then there is the estate tax. For those of us who have done well in our lives and paid taxes along the way, there is an extra kick on our way out. Its punitive—again taxing over 50 percent on money that has already been taxed. Do you think the government deserves that money or your family? I think I know the answer. And if you think that you aren't rich enough for the estate tax think again. Those numbers are coming down next year and there are many who would like to see it start as low as $1 million estates. This will affect you if you don't plan for it. Luckily there are groups like the National Taxpayers Union (NTU) Foundation out there that are looking out for us. In fact, there is a case about to go in front of the supreme court shortly that could have profound affects on your investments. The case is called Moore v U.S. and it is something you should absolutely know about. To help you understand what the stakes are, I invited NTU member Joe Bishop-Henchman to explain it to us on this week's episode of Wealth Formula Podcast. Show Notes: 00:07:47:12 Moore VS U.S. 00:10:21:01 The main arguement 00:15:17:18 What happens when either side wins? 00:20:10:24 What is defined as realised gain? 00:24:37:07 Implications of the ninth circuit court case 00:29:48:10 When can we expect a decision?

As the end of the year approaches, many of us are thinking about ways to mitigate our tax liability for 2023. Unfortunately, this year there is not a whole lot in terms of options. The IRS has clamped down on syndicated conservation easements and anything resembling it. If you are being talked into something like that, I would suggest you be very careful. Anyone selling them at this point is not looking out for your welfare. Similarly, although captive insurance is a legal right of every American, the IRS has made it its mission to audit them. It's almost as if the IRS has become a branch of government that ignores the legislative process completely. So what can we rely on? Oil and gas? No thank you. I've never made money in oil and gas and would have been better off just giving my money to charity. The space is also ripe for charlatans. At this point, you are pretty much left with investments that will give you some depreciation and that only helps you if you have passive income to offset. Real Estate opportunities have been far and few between. We have had one in 18 months and that is currently on waitlist. If you are an accredited investor feel free to check out that webinar at JoffreyCapital.com. You might get lucky and get in. So, what's left? Well, prepaying things for next year is not a bad idea. I used to prepay advertising for my now defunct cosmetic surgery office. If you are into deferred accounts that will give you some relief as well. There is one more option and that is simply to invest your money without significant tax benefits. Sometimes, as much as it pains me to say this, paying the tax is the right thing to do. After all, you can safely invest in a fair amount of stuff right now that is yielding pretty well. It's just not tax efficient. For example, you can put your money in CD's and get over 5 percent. Or, like me, you focus on life insurance products like Wealth Formula Banking or the Wealth Accelerator. There are many advantages to these kinds of policies that have been characterized as "investing with benefits". The benefits are often significant and under-appreciated as I have tried to point out on numerous occasions. But don't take it from me, take it from others who are doing the same thing and see if there is a line of reasoning resonates with you. These types of policies should probably be apart of every portfolio in my opinion. And in this week's Wealth Formula Podcast you'll hear why—not only from me but from other Wealth Formula community members. Show Notes: 00:07:06:15 What is Wealth Formula Banking? 00:13:19:07 What are the reasons why investors have chosen Wealth Formula Banking? 00:21:57:20 How have investors been using Wealth Formula Banking? 00:30:30:19 Amplifying your retirement strategy 00:47:57:06 The Wealth Accelerator 00:57:10:22 Advices from fellow investors

A lot has happened over the past year in real estate. It goes to show how quickly things can change. Unless you have been living in a cave, you know that interest rates went way up really quickly. When that happens, housing typically goes down in value significantly. Oddly enough, in much of the country, that wasn't quite the case. Why? Well, there wasn't much inventory. Record LOW rates created both a frothy market and a huge amount of liquidity in the housing market. People thinking of selling at that time sold. People thinking of buying were able to buy much more expensive homes than they normally could because of cheap money. And many of them locked those rates in. When there was a huge increase in interest rates, liquidity in the markets went way down keeping prices still elevated because of a supply and demand imbalance. A similar story was seen in investment real estate that is largely driven by cap rates. The difference being that much of investment real estate is purchased on floating rates. And, as many of us have seen, that has resulted in forced selling. Anyone who does not have to sell right now is not selling. Those who are forced to sell are losing money. This period in time for real estate investors will be emblazoned in our memories the way the financial crisis of 2008-2009 is. Hopefully some of us will also take advantage of what is occurring like people did in 2010. I anticipate 2024 will be a time with blood in the streets as many rate caps are expiring. This will be a great opportunity to pick up properties at significant discount. And those who do will very likely be rewarded for the ice in their veins. Why? Because predictions of lower interest rates in 2025 are overwhelming. If those predictions come true, it will create a situation where the investment real estate market becomes frothy again. People unable to hold on to properties is 2024 will be the biggest losers because they didn't do what they had to do to stay in the game. I know that staying in the game is not easy. For many of you, this period in real estate time has been the first and only time we've ever experienced loss. We know rationally, that, investors are not supposed to win every single time but that's what we witnessed for the past 14-15 years and we got used to it. But real estate is like every other asset in that it has cycles. This cycle ended abruptly and violently but another one is about to start. In this week's episode of Wealth Formula Podcast, you'll once again hear from an expert on the real estate market from the National Association of Realtors. When you hear what he has to say, along with other economists, you will understand why the mantra in the real estate investor ecosystem continues to be, "stay alive until 25". Show Notes: 00:09:57:17 What does 7% interest rate mean for real estate? 00:12:30:24 National Association of Realtors' prediction on mortgage rates in the coming months 00:14:38:09 Is interest rate the reason why people are not selling properties? 00:16:22:23 Is price stability regional or national? 00:18:26:12 Where are the strongest real estate markets in the country? 00:19:48:09 millennials vs Baby boomers: who's buying more homes right now? 00:21:32:07 Foreign real estate buyers in the US 00:23:14:05 How does marijuana legalization affect real estate 00:25:00:14 How do election cycles affect real estate 00:26:01:11 Prediction of the next 2-5 years

When I moved to Montecito a few years ago, I was amazed at how many people didn't seem to work. To be clear, we don't have a homeless problem out here. We just have a lot of people who own businesses. And it's not quite true that they don't work. They just don't have regular hours so there's a disproportionate number of people hanging out during the day. Of course, I myself am a business owner and my businesses have experienced their fair share of pain over the last several months. In fact, my cosmetic surgery business in Chicago finally went out of business after almost 15 years. And I know it's not just me. Everyone is slow and it seems like there are layoffs going on everywhere—lots of skilled people are losing their jobs. So I have been racking my brain trying to figure out why the economy is supposedly doing so well. I have come to the conclusion that we are not looking at the right indicators for the time that we live in. It's like we bought an electric car but are still watching to make sure we have a full tank of gas when we should really be paying attention to the battery charge indicators. We've always judged the economy in terms of two major indicators: jobs and GDP. And those numbers haven't looked that bad even after a year of oppressive rate hikes. But what does the jobs report really tell us? Is it telling us that many people left the workforce during COVID-19 and never came back? After all, you are only considered unemployed if you're actively trying to work. And when you see all those new jobs added to the jobs report every month, is that taking into consideration the additional part-time jobs people are taking just to make ends meet? The numbers we get make no distinction. The bottom line is, I am convinced we are missing something that will become very clear within the next 12 months. My guest on this week's episode of Wealth Formula Podcast believes this too. Believe it or not, he's an Austrian economist I discovered on TikTok. And, because of him, I now have a TikTok account and you probably will too! Show Notes: 00:05:59:05 Who is Peter St Onge? 00:09:20:23 Is there such a thing as true conservative economics in the modern political system in the US? 00:13:44:01 Is the economy actually doing well? 00:16:38:18 Why is the job rate going up when people are getting laid off? 00:21:38:03 Why high GDP might not suggest a strong economy 00:25:57:21 Statistics on Bankruptcy 00:28:50:18 When is the next recession coming? 00:35:40:04 Why have we not seen more regional bank failures?

It's NFL season and I'm still glued to the TV despite my team's rough start and the fact that we lost our starting quarterback for the year. In case you don't know, my team is the Minnesota Vikings and our starting quarterback was Kirk Cousins who just went down with a brutal Achilles tendon tear. Kirk makes a lot of money—$30 million in 2023. Of course, when we think of professional athletes, we generally think of them as crazy rich so you might not be surprised. You might be surprised to know, however, that the actual median salary in the NFL in 2022 was only $860,000 per year. I know for a fact that a lot of you Wealth Formula listeners make more than that. You know what I think of when I hear numbers like that? I think about how much they must be paying in taxes. Kirk Cousins is probably paying at least $12 million of his salary in taxes. And those guys at the median salary level are probably paying out almost $400K. They are, after all, W2 wage earners. Again, no one is starving even after paying those taxes but it certainly puts things in perspective. After all, it's not really about how much you make. It's about how much you get to keep. Every person's finances are like a small business. You have income coming in and you have expenses going out. A small business is going to do whatever it can to decrease expenses so it can keep more profit. So, if you are a business, what is your biggest expense? Probably taxes. And if that's the case, what are you doing to try to reduce those expenses and bring more money to your own bottom line? To be clear, we aren't talking about anything illegal here. As it turns out, there are plenty of things the government wants you to do that will help you save on taxes. My friend, Tom Wheelwright, calls the tax code simply a series of incentives. That's the smart way to look at it. As it turns out, your best way of saving on taxes tends to be through the way you invest. And, there is simply no industry that has more tax benefits than real estate. I truly believe this and want you to understand why. If you choose not to act on this information, that's fine. But at least know what you are missing out on so you can only blame yourself. I am always amazed at how extremely financially sophisticated individuals have no idea what they are missing. This week's Wealth Formula Podcast reviews some of the major concepts in tax mitigation via real estate investing. There's something here for everyone including those new to the game. So make sure to tune in. Buck Show Notes: 00:09:30:01 How are people overpaying taxes? 00:10:34:14 How to get around active income with passive investments 00:18:55:22 Real Estate Professional Destination 00:21:19:24 Audit protection 00:22:29:07 Getting the benefit of being a Real Estate Profession through your spouse 00:24:25:19 Getting the benefit of being a Real Estate Profession with short-term rentals 00:25:29:15 Should I put my real estate in an LLC? 00:26:48:22 The role of a C-Corp 00:28:51:10 How to audit-proof your returns 00:30:45:18 Are you more likely to be audited if you are a Real Estate Professional? 00:32:24:16 How to use your kids to reduce tax 00:34:06:15 What is the cost segregation analysis 00:38:43:18 Upcoming new tax laws 00:42:34:21 Learn more about Keystone CPA

The world of real estate is kind of a cult. Members of this cult tend to think that pretty much anything outside of real estate is just a waste of money. I used to subscribe to this religion. And, for the most part, I still kind of do. My portfolio is largely real estate and I truly believe it is the most tax-efficient consistent way of building wealth out there. But it's not the only way. I've made plenty of money as an entrepreneur and I know that you can make a lot of money in other kinds of business as well. The key to making money in any of these endeavors is to know what you are doing. I know how to start businesses and I know how to make those businesses profitable, but I don't really know how to buy them or know which business to invest in. It's good to know your weaknesses because they are often not insurmountable. If you don't have the expertise, you just need to find someone who has it that you can trust. That is the primary reason that we have partnered with Zulfe Ali in Investor Club. These days Zulfe is a broker-dealer. But prior to that, Zulfe spent decades in mergers and acquisitions at the largest banks in the world and was the chief investment officer of a sovereign wealth fund in the Middle East that acquired multibillion-dollar businesses on a regular basis. My goal in bringing him on board is to develop a broader platform of investments in the Wealth Formula ecosystem and, frankly, in my own portfolio. I want to create a platform where all of our investments are of institutional grade whether that be in real estate or any other asset class. A platform like this for individual retail investors like us does not currently exist. I know that there are plenty of offerings outside of real estate that you see on a regular basis through the podcast ecosystem but I must tell you that I am wary of most of them. Too many people have been ripped off because the people raising money are either unwilling or unable to do the level of due diligence needed to make sure that an opportunity is real or economically viable. Hopefully, we can change that with what we are rolling out with the help of Zulfe. He introduced me to today's podcast guests so I feel comfortable exposing you to them. These guys, in particular, are in the commercial transportation industry and this week's podcast will focus on an asset class that you are probably unfamiliar with but is dominated by institutional money: the commercial airline industry. This is one of the areas in which we are currently doing due diligence and my guests today have been identified as a potential partner for our group. Make sure to tune in. This industry is fascinating and I believe worth consideration as a future addition to your portfolio. Start learning about it now. Buck

No one getting married thinks that they will ever get divorced. I can tell you that from personal experience. Yet over half of American marriages end up in divorce. I was lucky in that I had an amicable break-up. Most of the divorces I've seen in the past few years have been ugly. I have two friends finally get through divorces in the last two years. In both situations, the men originally offered what they thought were fair settlements that their wives rejected. In both cases, the divorces lasted for years costing hundreds of thousands of dollars. And, in both cases, the wives ended up with LESS than originally offered. But it wasn't just the ex-wives who lost out. No one wins in an ugly divorce. The kids suffer and there is a huge emotional and financial toll to pay for both sides. The only winner is the divorce attorney. Knowing this should be enough to convince anyone to have a prenup in place before getting married or even get a postnup in place after the fact. But it's not that easy. How do you even bring up a prenuptial agreement when you are in love with someone and planning a life together? My guest on Wealth Formula Podcast specializes in this area of the law and has experience at the highest level of prenuptial complexity with celebrities, athletes and ultra high net worth individuals. The issues, whether they are emotional or financial, are often the same and he has great perspective on how to approach these sensitive issues. So, whether you're married, divorced or just curious, make sure to tune in and learn the basics on prenups and postnups. LISTEN HERE.